# CMA Study Group

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## Marginal Analysis Part2

• #### 1.  Marginal Analysis Part2

Posted 5 days ago
Hi,
Why is engineering machine related cost i.e. 0.5 not considered?
Didn't get what is being asked in the que.
plz help

• #### 2.  RE: Marginal Analysis Part2

Posted 4 days ago

In the given question , manufacturer specification about each United machine cost is 0.5 as manufacturer sells a machine that is capable to produce 1,600,000 units for just 800,000 dollars . So manufacturer allocated the cost of machine towards the total number of units it can produce in its lifetime resulting 0.5 dollar to come as per unit machine cost. But when the company investigated they found out the machine would last to a time till when the total anticipated demand would 1,200,000 units . So when we apportion the cost of the machine towards the our anticipated units it would come as 0.67 dollars per unit .

Now think if a corporation sets up the price after taking machine related cost per unit as 0.50 (as manufacturer said) , it won't be able to depict the true profit or if company is aiming a certain level of profit the company wouldn't reach it as taking 0.50 dollars per unit will mean the machine cost is apportioned (1,200,000×0.50) = 600,000 dollars so , we still 200,000 dollars of machine cost is left to be apportioned thus it would affect the targeted profit . That's why we need to advise the corporation not to use the manufacturers per unit machine related cost and rather advise the firm using 0.67 dollars per unit as per unit machine related cost.

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Avimitra Ghosh
Supervisor
Howrah/Belgachia
India
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• #### 3.  RE: Marginal Analysis Part2

Posted 4 days ago
Thanks a lot !!!